Which of the following statements about production technologies is incorrect

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A. Economies of scale imply that the marginal cost of production decreases as output increases. 

B. Increasing returns to scale implies that the average cost of production decreases as output increases.

C. Large scale production is advantageous to the firm if the production technology exhibits economies of scale or increasing returns to scale.

D. Large scale production is advantageous to the firm if the production technology exhibits either economies of scale or diseconomies of scale.

Select one:

a. A, D

b. A, C

c. A, C, D

d. B, C

e. A

2.Which of the following statements are correct?

A. Workers would exert effort into work if their employment rent is negative.

B. Employment rent benefits workers but harms the firms as it implies higher production.

C. A complete contract can be written with the inclusion of piece rate pay.

D. Firms pay workers more than their reservation options so that workers do not want to leave. 

Select one:

a. C, D

b. A, C, D

c. B, C

d. B, D

e. A, C

3.Which of the following statements about price elasticity of demand is correct?

Select one:

a. Inelastic demand implies that there are few close substitutes.

b. The higher a firm's markup, the higher the price elasticity of demand.

c. The higher the price elasticity of demand, the steeper the demand curve.

d. Price elasticity of demand is equal to the slope of the demand curve.

e. Elastic demand implies a firm's high market power.

4.Which of the following statements about firms and markets is incorrect? 

Select one:

a. The asymmetric information problem prevailing in firms arises as managers do not share confidential information with workers.

b. Owners and workers in a firm share interests as they both want the firm's success.

c. In general, a firm has more workers than managers.

d. Friendship with co-workers is a firm-specific asset.

e. Contracts for products sold in markets transfer permanently the ownership of a good from the seller to the buyer.

5.Maya, a manager of MQ Cafe hires Marco, a barista. Which of the statements is incorrect about relationship between Maya and Marco?

Select one:

a. The incomplete contract occurs between MQ Cafe and its customers.

b. Principal-agent problem arises in the relationship between the employer and the employee.

c. The employment contract between Maya and Marco will be incomplete due to the difficulty of measuring Marco's performance.

d. Maya may pay Marco more than his reservation wage so that Marco exerts effort at work.

e. The relationship between Maya and Marco has the same problem that occurs in the relationship between the owner of MQ Cafe and Maya.